Question

The money paid to a worker as reward for his work is known as ___________

• A. Real wages
• B. Nominal wage
• C. Quasi rent
• D. Interest

Hint:

Remember the wage distinction:
- Nominal Wage = Cash paid (face value of money).
- Real Wage = What that cash can buy (purchasing power).

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
In economics, wages are the payment or reward earned by labor for contributing to production.
Wages are classified into two types: nominal wages (money wages) and real wages.
Distinguishing between these two terms is essential for understanding purchasing power and inflation.

Step 2: Detailed Explanation:
Let us define the wage and payment terms listed in the options:
1. Nominal Wage (B):
This is the actual amount of money or cash paid to a worker as a reward for their labor (such as $\text{Rs. } 500$ per day or $\text{Rs. } 30000$ per month).
It is also known as the money wage because it is expressed purely in monetary terms, without adjusting for inflation or purchasing power.
Therefore, this definition matches the question.
2. Real Wage (A):
This refers to the purchasing power of the nominal wage.
It represents the actual quantity of goods and services that a worker can buy with their money wage, calculated by adjusting the nominal wage for the general price level (inflation):
\[ \text{Real Wage} = \frac{\text{Nominal Wage}}{\text{Price Level}} \] 3. Quasi Rent (C):
This is a term coined by Alfred Marshall to describe the short-term surplus earned by man-made machines and appliances whose supply is temporarily fixed, similar to land.
4. Interest (D):
This is the reward paid to the owner of capital for lending or investing their money.

Step 3: Final Answer:
The actual money paid to a worker as a reward for their labor is called the nominal wage.
Therefore, the correct option is (B).